Q.1. What should I do with any inheritance that I receive?

You should consider doing the same types of things you would do if you had won a lottery. Get some financial advice from a qualified financial adviser. Consider paying off any debts, starting with the high-interest debts first. In addition, consider investing but do it wisely and in such a way as to shelter as much of the money as possible from taxes. Finally, remember the rule of “don’t touch the capital” and structure things so that you use the interest generated from this money as opposed to the money itself. Some examples of what to do with a windfall can be of assistance.

Q.2. How much goes to taxes?

The Canada Revenue Agency will take a portion of your inheritance in taxes. This amount could be as much as 50% depending upon the circumstances. This “Canadian Living” article explains some of these circumstances.

Q.3. What is inheritance tax in Canada?

Inheritance tax is actually a wealth transfer tax. When a person dies no tax is payable on cash in the bank etc. but all capital assets such as real estate and stocks are subject to taxation. These are deemed to be sold at fair market value and taxes paid accordingly.

Q.4. Are there any specific issues associated with inheritances?

Sometimes there are special circumstances surrounding an inheritance. If money if left to a minor, for example, that money will have to be put into a trust fund until the individual is of legal age. There may also be specific conditions spelled out in the will which have to be met before any inheritance can be given. The executor of the will must address these issues.